UPDATE 2-Top US lawmaker eyes subsidy review on tanker deal

WASHINGTON May 14 (Reuters) - The head of the U.S. House
of Representatives Armed Services Committee is conditionally
seeking a review of any illegal subsidies' role in a $35
billion refueling-aircraft contest lost by Boeing Co (BA.N: Cotización), a
committee aide said on Wednesday.

On Feb. 29, the Air Force picked a team made up of Northrop
Grumman Corp (NOC.N: Cotización) and Airbus parent EADS EAD.PA, rather
than Chicago-based Boeing, to start building a new fleet of
tanker aircraft based on Airbus's A330 aircraft.

Panel chairman Ike Skelton, a Missouri Democrat, has
prepared legislation that would mandate an Air Force review if
the World Trade Organization finds fault in a subsidy dispute
pitting Boeing against Airbus, its rival in the commercial
aircraft market.

If WTO rules an illegal subsidy was given to "any large
commercial aircraft manufacturer," Skelton's legislation would
require the Air Force look at the potential impact of that
subsidy on the tanker program's selection process, the aide
said.

"If the Air Force determines that the subsidy did impact
the competition, then it must find a way to remove the impact
from the competition to ensure the fairness of the process," a
summary of the plan said.

Skelton's legislation was expected to be adopted by the
Democrat-controlled Armed Services Committee in a matter of
hours as part of its fiscal 2009 defense authorization bill.
The committee was working late into the night.

The Senate Armed Services Committee, for its part, steered
clear of the issue in its version of the bill. The two must be
reconciled before legislation may be signed into law by the
president.
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